Local auditor reporting on local government in England Contents

Summary

Without urgent action from government, the audit system for local authorities in England may soon reach breaking point. With approximately £100 billion of local government spending requiring audit each year, the Ministry of Housing, Communities & Local Government (the Department) has become increasingly complacent in its oversight of a local audit market now entirely reliant upon only eight firms, two of which are responsible for up to 70% of local authority audits. This has not been helped by the growing complexity of local authority accounts, with audit firms now asked to carry out more work in each audit, comply with new regulatory demands and adapt to the new multifaceted landscape in which local authorities operate, while also struggling to hire and retain experienced auditors. Such problems have been evident since 2018, but the COVID-19 pandemic has heightened them with less than half of local authorities completing their audits on time in 2019–20, while more than half of the audits examined by the Financial Reporting Council (FRC) needed improvement. If local authorities are to effectively recover from the pandemic, it is critical that citizens have the necessary assurances that their finances are in order and being managed in the correct manner.

The government-commissioned Redmond review of local government accounts and audits reported in September 2020. On 19 May 2021, the Department issued an update on its response to Redmond’s recommendations and its now preferred option for a system leader. The need for system leadership for local public audit, identified by Redmond, is pressing. But the government’s announced option that the future Auditing, Reporting and Governance Authority (ARGA) will become the new system leader, will take time to establish. The Authority will not be set up until 2023, at the earliest, and will require legislation. Until then, it remains unknown whether this option will be able to fully address the current failings in the market for auditing local authorities. In the meantime, the Department has much more to do to provide credible details on the practical and concrete steps it intends to take to address the urgent problems that cannot wait for ARGA. We will track progress closely for assurance that when the new system leader arrangements are operating, the local audit market will still be in place.




Published: 14 July 2021 Site information    Accessibility statement